About The Chinese Individual Income Tax

In any country you will live and work in, one question might be raised: where and under what kind of taxes will you be subjected?

This issue is appreciable for our customers, who will have their residency in China mainland. Some recent changes in the Chinese Individual Income Tax regulation took place on January 1st, 2019. As such, it is important for newcomers as well as for those already living in China to be aware of the new regulation.

ASI Movers - as expats' best relocation partner from, to, and within China - will offer a brief overview on the topic for those planning to move to China this year.

Who Is Subject To China's Individual Income Tax?

If you are planning to stay in mainland China for more than 183 days (cumulative), with a domicile or not, and in a single tax year, you will be therefore considered as a Chinese tax resident and must pay the Individual Income Tax. This will be derived from any income earned inside China as well as overseas income.

In the case of individuals who have no domicile in China but stay longer than 183 days (in a tax year), they shall be exempted from this Individual Income Tax if and only if they are out of the country for more than 30 consecutive days within the 6 years. To benefit from this exemption, this trip shall be notified to your local tax bureau in advance. Before the updated regulation, this exemption was known as the “Five-Year Tax Rule”, as the count was held for 5 and not 6 years.

For those who are non-resident, and stay in China for less than 183 days (in a tax year), their China source income is still taxable.

Which Incomes Are Taken Into Consideration & At Which Rate?

Taxes will be collected, directly on wages, on the following income:

  • Income from wage, from your employment contract;
  • Income from contract or lease of a business;
  • Author’s remuneration and royalties;
  • Interest, dividends, and profit distribution.

Under the new Income International Tax, these four categories followed the same seven brackets of progressive tax rates.

Commissions and bonuses are included in this calculation. Some deductions (up to monthly RMB 5.000) can be applied for the following expenses on the cumulative individual income:

  • Children's education: 1.000 RMB monthly per child;
  • Continued education: 3.600 RMB/year;
  • Caring for the elderly (over 60 years old): 2.000 RMB/month;
  • Medical expenses for serious illness: less than 80.000 RMB;
  • Housing loan interest and housing rent: depend on the city.

a person holding a piece of paper with a picture of a building in the background

The individual income tax impacts both local and foreign employees who received income from a working contract in China. These new regulations take into account the situation of the expatriate families with children or dependents elders.

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